Some of the first European countries to acquire colonies in the "New World" (and elsewhere) were Spain and Portugal. They "discovered America" (as the euro-centric interpretation goes), and had several colonies all over the globe (Americas, getting to Japan before others, India, East Africa, etc.). It would seem obvious to conclude that in the 15th/16th centuries Spain and Portugal were some of the richest (and hence most powerful ountries in Europe, right?

However, by the start of the 20th century, UK, France, Germany, and others were now very powerful. The British Empire was massive, the French Empire included a lot of Africa, etc. So it would seem only obvious to conclude that they were now very rich and powerful countries.

What factors caused this to change? It seems obvious to think that once you're big, rich and powerful, that it's easy to stay big, rich and powerful. What factors prevented Spain & Portugal from remaining big & powerful? What prevented them from acquiring African colonies? What prevented them from becoming big players in WW1 (a war among powerful European states)?

You bring up convincing evidence that colonies don't make either rich or powerful, at least not for long. ;) It isn't about colonies and all countries abandoned colonies in the 20th century because they gave them no advantage. The driving force was trade and that's where UK got big.
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Wladimir PalantOct 18 '11 at 17:26

3 Answers
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The most important "paradigm shift" of the early 19th century was the Industrial Revolution. That was the harnessing of the steam, and later, internal combustion engines, for manufacturing advances that led to an "order of magnitude" gains (five to ten times) in the standard of living. The great powers of the time were also among the earliest beneficiaries of this industrial revolution; the U.K., France, and Germany.

Spain and Portugal had been the beneficiaries of an EARLIER paradigm shift, the acquisition of colonies, from which to import raw materials, and to which to exported finished goods. That's why they became world powers in the 16th and 17th centuries. But their rising to the top during this period did not help, and may have hurt their ability to adjust to the later wave.

Another reason is that the colonies all rebelled, and became independent, and some of them became world powers in their own right. Brazil and India are now two of the "BRIC" nations. So is China, formerly a "semi-colony" of the European powers that enjoyed spheres of influence. Another former colony of comparable size and population to the BRIC countries is, of course, the United States. These countries managed to establish modern industrial states over larger areas and populations than the Europeans.

@Joze: It is a rare independence movement that is led by the Crown Prince of the home country. But if Brazil did not rebel under Dom Pedro, what did it do? brazil.org.za/independence.html
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Tom AuFeb 10 '12 at 19:38

"The nail that sticks out gets hammer down" While a Japanese saying, it holds true for all the super powers. Be their outside enemies, inside corruption, or just economic bad luck, the hammers are numerous indeed.

Spain in particular, was cripple by mega inflation due to all the gold coming from the Indies. Portugal was assimilated into Spain and then broke free -- thus cause strive. Spain's war in Flanders were costly in both money and lives. Everyone hated Spain and attacked it either directly or indirectly. Then a series of wars (Spanish succession to name but the last one) happened that crippled Spain allowing England and France to take over.

The French revolution and Empire caused enough trouble to set the stage for future empires: France, England, Prussia, Austria, and Russia. Colonies started to become more and more expensive to run and the first world war did cripple the economies of Europe. In addition the crash of 1929 put the final nail in the coffin and the depression gave rise to Nazi. One war later, only two super power were left: the USA and the USSR. Enter the cold war... Now, that this is over we have the USA all by itself. Maybe India or China or the EU or something else will happen. Too early to tell.

I believe (although I can't cite a source right now), that Spain and Portugal's colonies were organized around resource extraction - the Spanish grants didn't even specify land, but rather the labor.

The English Colonies were organized around building new infrastructure. Although they didn't have the terminology to discuss it, England and France performed "capital deepening", while Spain and Portugal were victims of the Dutch Disease.